How and When to Transfer an RESP to Your Grandchildren

Opening an RESP for grandchildren

A registered education savings plan (RESP) is an excellent tool for saving for post‑secondary education. Parents commonly open RESPs for their children, and grandparents can also open them for grandchildren. In fact, anyone—a relative or a family friend—can open an RESP for a child, provided they follow the rules set by the plan provider.

Contributions to an RESP grow tax‑deferred and are eligible for government grants and bonds. When money is withdrawn to pay for education, part of the withdrawal is taxable and part is tax‑free: the investment growth and grants are taxed in the hands of the student, who often pays little or no tax because of low income during studies.

Should you give money to your children to contribute?

Some grandparents prefer to pass funds to their children so the parents can make RESP contributions on behalf of the grandchildren. That approach can be sensible for several reasons. It relieves the grandparent of ongoing account management and helps ensure contributions qualify for government grants. It can also reduce the risk of overcontributing—there is a lifetime contribution limit of $50,000 per beneficiary—and avoids missing the annual contribution thresholds that determine grant eligibility (commonly up to $2,500 per year is eligible for the basic grant, and contributions intended to catch up for prior years are subject to specific rules).

In your situation, Bill, the RESP is part of your broader estate picture. Your grandchildren will likely still be of school age 15 years from now, and you could be in your 90s by then. While many grandparents hope to remain involved when grandchildren attend post‑secondary programs, it’s sensible to plan for the possibility that you might not be available or able to manage the account later.

Joint RESP accounts

You say you opened a joint RESP. Often people use the term “joint” when they mean a family RESP for multiple beneficiaries. A family RESP is useful when you want to combine savings for siblings: the plan’s funds can be allocated to either child, which gives flexibility if one child attends a more expensive program or if one does not pursue post‑secondary studies.

Some institutions permit a RESP with multiple subscribers—people who share responsibility for the account—but rules vary. For estate planning, having more than one subscriber can simplify the transition of control. Keep in mind, however, that many providers restrict joint subscribers to spouses or common‑law partners, including former spouses in some cases.

Naming a successor subscriber

Depending on your financial institution, you may be able to name a successor subscriber who will take over management of the RESP if the original subscriber dies. Check your plan documents to see if this option exists for your grandchildren’s RESP. Note that in some jurisdictions—Quebec is a common exception—you cannot name a successor subscriber through the provider.

If you cannot name a successor subscriber directly with the financial institution, the RESP could form part of your estate when you die. That may trigger probate fees and could create tax consequences on the account’s growth. It may also require returning government grants and bonds to the program if the funds can’t be used for eligible education expenses.

If the RESP provider doesn’t allow a successor to be named on the account, you can often address succession in your will. By naming who should receive management of the RESP in your estate plan, the account can be transferred to your chosen person—typically your child—so they can continue managing the funds for the grandchildren.

Transferring an RESP account

You can transfer RESP ownership during your lifetime without immediate tax consequences, provided the beneficiary on the receiving account is the same as on the original RESP. That means you could proactively transfer ownership to your son now so he can manage the account for your grandchildren, while preserving the plan’s tax and grant advantages.

Transferring during your life can reduce uncertainty and administrative burden for your estate later. It also clarifies who will be responsible for making future contributions, tracking grant entitlements, and arranging eligible withdrawals when your grandchildren attend post‑secondary school.

In short, you have several options. You can transfer the RESP to your child now to ensure continuity and simplify future administration, or you can plan for succession through the RESP provider or your will so that the account is handled smoothly after your death. Check with your plan provider about successor subscriber rules, and consider discussing your wishes with your family and an estate planning advisor to make sure the RESP is managed the way you intend.

Read more about RESP topics:

• 6 ways Canadians can invest in an RESP on a tight budget
• The top 5 questions about RESPs
• The benefits and flexibility of family RESPs
• Unconventional ways of investing in a family RESP